Crude Oil Falls Before Report That May Show U.S. Supply Gain

By Mark Shenk

Jan. 22 (Bloomberg) -- Crude oil fell in New York before a government report today that’s forecast to show U.S. stockpiles increased for the 15th time in 17 weeks.

Inventories rose 1.4 million barrels in the week ended Jan. 16, according to the median of 14 analyst estimates in a Bloomberg News survey. Stockpiles at Cushing, Oklahoma, where the West Texas Intermediate grade traded in New York is stored, have risen to the highest level in at least four years.

“We will continue to see crude supplies increase on a weekly basis throughout the quarter, and some of these gains should be eye-popping,” said Jim Ritterbusch, president of Ritterbusch & Associates, in Galena, Illinois. “There’s also a lot of excess supply sitting out there, some of which is going to find its way to the U.S. market.”

Crude oil for March delivery fell $1.49, or 3.4 percent, to $42.06 a barrel at 9:38 a.m. on the New York Mercantile Exchange. Prices are down 53 percent from a year ago.

The U.S. Energy Department will release its weekly supply report at 11 a.m. today in Washington, a day later than usual because of the Martin Luther King Jr. holiday on Jan. 19.

Companies including Citigroup Inc.’s Phibro LLC, Royal Dutch Shell Plc and BP Plc have stored oil on tankers as the so-called contango, a market where buyers pay more for supplies later in the year than now, allows them to profit from hoarding crude.

Saudi Arabia, the world’s top oil exporter, decided to cut production by 300,000 barrels a day below its OPEC quota to prop up prices, Algerian Oil Minister Chakib Khelil told the state-run newspaper El Moudjahid. The desert kingdom will make the reduction before a March 15 meeting of the Organization of Petroleum Exporting Countries.

Production Targets

New production targets for OPEC members came into effect Jan. 1 following a Dec. 17 meeting in Oran, Algeria. The 12- member group needs to make the deepest supply cuts in its history to comply with the revised quotas.

The 11 OPEC nations subject to output limits pumped a combined average of 27.45 million barrels a day last month, according to Bloomberg estimates. That’s 2.6 million barrels more than the 24.845 million-barrel-a-day ceiling. Iraq is exempt from quotas.

Brent crude oil for March settlement declined 10 cents to $43.92 a barrel on London’s ICE Futures Europe exchange.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.